Housing affordability improving, but number of first home buyers down, report finds

Housing affordability improving, but number of first home buyers down, report finds

Housing affordability across the nation is slowly improving, but the credit squeeze is putting the brakes on the number of first home buyers entering the market, the Adelaide Bank/REIA Housing Affordability Report has revealed.

Image supplied by Adelaide Bank

Pictured: Adelaide Bank Head of Third Party Banking, Darren Kasehagen

Image by Tom Rumble via Unsplash

Pictured: Housing affordability across the nation is slowly improving, but the credit squeeze is putting the brakes on the number of first home buyers entering the market, the Adelaide Bank/REIA Housing Affordability Report has revealed.

Image supplied by REIA

Pictured: REIA President Malcolm Gunning

Housing affordability has improved across the nation as the real estate market cools and banks put the brakes on credit.

In its September quarterly report, the Adelaide Bank/REIA Housing Affordability Report found the proportion of income required to meet loan repayments decreased nationally to 31.4 per cent.

The improvement was strongest in New South Wales, where the proportion of income needed to meet mortgage repayments fell 1.5 percentage points over the quarter to 36.6 per cent.

Adelaide Bank Head of Third Party Banking Darren Kasehagen welcomed the continued improvements in housing affordability.

“The improvement in housing affordability nationally is a welcome finding. Victoria continues to lead with the highest number of first home buyer loans and housing affordability improved most in New South Wales for the September Quarter.

"Refinancing excluded, the Australian Capital Territory had the biggest decrease in the number of loans at -7.8 per cent," he said.

REIA President Malcolm Gunning said the September quarter 2018 edition of the Adelaide Bank/REIA Housing Affordability Report found rental affordability improved in all states and territories except for Victoria and Tasmania.

“New South Wales showed the most improvement in housing affordability over the quarter and the Northern Territory show the most improvement in rental affordability,” Mr Gunning told WILLIAMS MEDIA.

Even so, New South Wales is still the most expensive state to rent, with the proportion of income required to meet rent repayments at 28.5 per cent, 4.6 per cent higher than the national average.

On a national basis, housing affordability is still worse than it was a year ago with the proportion of income required to meet mortgage repayments rising 1.1 per cent.

Market cools

Over the quarter, housing affordability improved in all states and territories except Queensland, where there was no change, the report found.

Rental affordability also improved in all states and territories over the quarter, with the proportion of income required to meet rent payments, dropping 0.2 per cent to 23.9 per cent of income required to meet median rents.

“Over the quarter the proportion of median family income required to meet average loan repayments decreased by 0.8 percentage points to 31.4 per cent, while the proportion of median family income required to meet rent payments decreased by 0.2 percentage points to 23.9 per cent," REIA President Malcolm Gunning said.

Across the country, the number of loans decreased by 4.8 per cent, with decreases in all states and territories, the largest in the Australian Capital Territory (-7.8 per cent).

All states and territories showed an annual decline in new loans except for Tasmania where there was a 2.7 per cent increase. The decline ranged from 17.6 per cent in Western Australia to 4.4 per cent in South Australia.

“When you consider that rents in Tasmania are now 28.3 per cent of income and loan repayments are now at 25.1 per cent, the decision to switch from renting to buying has never been easier. On these numbers, it’s about $50 a week cheaper to buy than rent, which may explain why Tasmania is bucking the trend as the only state to see an increase in the number of loans," Mr Kasehagen said.

The affordability findings come as more signals accumulate of cooling housing markets in Sydney and Melbourne.

Sydney house prices fell another 1.4 per cent in November, with year to date prices down -8.1 per cent, according to figures from CoreLogic's November hedonic home value index.

House prices in Melbourne also fell 1 per cent, with year to date price growth subdued at -5.8 per cent.

Number of first home buyers down

The number of first home buyers decreased to 27,839, a decrease of 3.7 per cent compared to the same time last year.

The Northern Territory saw the largest increase in first home buyers at 14.7 per cent, while the number of first home buyers also increased in Queensland, South Australia, and Tasmania.

“Despite improved housing affordability, the number of first home buyers decreased by 2.0 per cent over the quarter. However, the results are mixed around the country with large increases in the Northern Territory (14.7 per cent) and a decline in Western Australia (-5.7 per cent).

“The decline in first home buyers is systematic of the credit squeeze that is emerging. While APRA’s restrictions were designed to curb high-risk lending practices the current practice of reducing loan amounts and increasing approval times across the board is becoming a constraint on economic growth,” Mr Gunning told WILLIAMS MEDIA.